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Analysts note ‘muted’ 1Q2024 NODX as February’s numbers disappoint

Felicia Tan
Felicia Tan • 7 min read
Analysts note ‘muted’ 1Q2024 NODX as February’s numbers disappoint
Analysts from OCBC, UOB and Maybank are keeping their FY2024 NODX estimates unchanged. Photo: Bloomberg
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Singapore’s non-oil domestic exports (NODX) fell by 0.1% y-o-y and 4.8% m-o-m to $14.2 billion in February. During the month, non-electronic NODX fell by 1.5% y-o-y with food preparations, specialty chemicals and electrical circuit apparatus contributing the most to the declines at 23.5%, 19.7% and 36.9% respectively.

Meanwhile, electronic NODX rose by 5.2% thanks to integrated circuits (ICs), personal computers (PCs) and parts of ICs contributed the most with y-o-y growths of 15.9%, 26.2% and 54.8% respectively.

To Selena Ling, chief economist and head of global markets research and strategy at Oversea-Chinese Banking Corporation (OCBC), the “unexpected” contraction of February’s NODX came as a disappointment. However, as the Lunar New Year holidays fell in January last year but happened in February this year, Ling deems it to be more appropriate to look at the average of the performances in January and February.

For the two months, Singapore’s NODX grew at an average of 8.4% y-o-y, an improvement from the 20.4% y-o-y contraction registered for the same period in 2023. Singapore’s NODX expanded by 16.7% y-o-y in January.

This seems to be the trend with Taiwan’s February exports also moderating sharply from 18.1% y-o-y in January to just 1.3%, with parts of electronics products also sinking by 10.4% y-o-y. South Korea’s February semiconductor exports rose 6.7% y-o-y, lower than its 56.2% y-o-y expansion in January, notes Ling.

That said, electronics exports, which saw its second month of expansion and a marked y-o-y improvement in February, came as a “silver lining”.

See also: Singapore keeps 2024 GDP growth forecast at 1% to 3%; expects gradual manufacturing and trade recovery

Overall, the economist sees the 1Q2024 to be a “muted start” for NODX. With her March forecast of -8.0% y-o-y due to the high base last year, 1Q2024 NODX is expected to come in at 2.9% y-o-y.

However, Ling’s NODX forecast for the full year remains at 4% to 6% y-o-y, same as the official forecast.

“While the external demand picture is stabilizing, the geopolitical implications on supply chain recalibration continues to shift,” says Ling, referring to several updates including US Commerce Secretary Raimondo’s remarks about the US helping the Philippines double its semiconductor facilities to lessen the concentration of the global chip supply chain from a few countries.

See also: Another possible delisting hastens calls for SGX revival

The US Commerce Department is also considering adding several Chinese tech companies to its entity list which restricts access to US technology. At the same time, China’s Ministry of Industry and Information Technology was reported to have asked electric vehicle (EV) car-makers including BYD and Geely to increase the use of local auto chipmakers.

Meanwhile, Republican nominee Donald Trump has threatened 100% tariffs on Chinese cars manufactured in Mexico.

“The implications for the rest of Asean manufacturing outlook, particularly for the chip sector, remains slightly cloudy at this juncture, albeit artificial intelligence (AI)-enabled phones and PCs may see increased demand going forward,” says Ling.

“Singapore’s manufacturing and electronics purchasing managers’ index (PMIs) had also eased marginally to 50.6 and 50.4 respectively for February, compared to 50.7 and 50.6 in January 2024, but remained in expansion territory,” she adds.

UOB’s senior economist Alvin Liew and associate economist Jester Koh are keeping their full-year NODX estimate unchanged at 6.0% despite the weaker-than-expected numbers.

To them, the data from January and February points to an “ongoing recovery” in NODX with an average 8.4% y-o-y expansion. “[This is] arguably a more reliable assessment as it partly accounts for the Lunar New Year holiday effects,” they write.

While February’s NODX was dragged by non-electronics products, the economists see recovery prospects in electronics.

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“Given the inherent volatility in NODX, we smooth the data by computing the y-o-y changes of the average NODX for the last six months (“six-month moving average (6MMA) y-o-y”) to capture key trends,” say the UOB economists.

“On a 6MMA y-o-y basis, electronics NODX exhibited incrementally narrower contractions (February: -6.5%, January: -10.9%, December: -15.3%) from the weakest reading recorded in May 2023 (-24.0%) which affirms the ongoing upturn in the electronics / semiconductor cycle. Likewise, on a 6MMA y-o-y basis, NODX to our top trading partners recorded successive improvements, namely to the US (February: 11.7%, January: 0.7%), China (February: 28.6%, January: 23.6%) and European Union (EU) 27 (February: -13.5%, January: -17.4%),” they add.

In 2024, the economists see that Singapore’s NODX will see a recovery mainly due to the base effects of the sharp double-digit y-o-y decline in electronics NODX from November 2022 to September 2023. That said, they note that the sequential recovery could be challenging in 1H2024 given tight financial conditions in the US and EU. 

The decline in February's NODX has caused HSBC Global Research economist Yun Liu to question whether the recovery of trade in Singapore is sustainable.

"NODX’s marginal decline in February was a disappointment, at first glance. Not to mention that it also defied market expectations for sustained growth," says Liu. February's NODX was dragged by non-electronic shipments, which the expansion in pharmaceutical NODX failed to offset.

However, she notes that a one-off disappointment may also belie green shoots in Singapore's trade recovery, adding that the country still remains on track to see a turnaround in the trade cycle. A glance at electronic NODX for the month also provided hopes for a better tech cycle.

"Given [the] Lunar New Year distortions, it is also crucial to examine the NODX data for the first two months of this year combined to smooth out such distortions. After falling 13% y-o-y in 2023, NODX rebounded strongly by 8.4% y-o-y in January and February. Except pharmaceutical shipments, which expanded sustainably by a double-digit pace, semiconductor and petrochemicals NODX clearly bottomed out, driving trade recovery," she writes.

"For the first time after 18 months, semiconductor NODX returned to growth, not to mention that the pace was in the double-digits. The sharp improvement was not only a price story, but more so thanks to rising quantity of shipments. While electronics NODX momentum, measured on a 3-month moving average basis, was still in the contractionary territory, it nonetheless jumped much closer to positive growth territory," she adds.

Maybank Securities analysts Chua Hak Bin and Brian Lee note that NODX growth from January to February remains "healthy" with an 8.4% y-o-y growth. The two-month reading factored in the Lunar New Year distortions, which took place earlier in 2023. Real NODX grew by 11.2% y-o-y in January to February.

In 2024, the analysts believe NODX will still recover and grow, keeping their estimates between 7% and 9%.

"The export recovery remains intact, although the February figure was slightly weaker than anticipated. The Red Sea crisis may have impacted exports in the early months of 2024, disrupting supply chains and delaying shipments. Nonetheless, the combined January - February export data remains healthy, in both value (+8.4%) and volume (+11.2%) terms," write Chua and Lee.

"Moreover, the headline and electronics PMIs suggest that the outlook remains bright. New export orders for manufacturing (51.3 versus 51.5 in Jan) and electronics (50.7 versus 50.9 in Jan) cooled slightly in February, but remain firmly in expansion territory. The upcoming February manufacturing data (out on 26 March) will shed more light on the strength and momentum of the recovery," they add.

Chua and Lee have also kept their full-year GDP forecast at 2.2% in 2024, which is slightly higher than the midpoint of the government’s 1% - 3% forecast.

RHB Bank Singapore's acting group chief economist & head of its market research Barnabas Gan and associate research analyst Laalthia Raveenthar, have kept their NODX forecast unchanged at 3.0% y-o-y in 2024 despite the negative print in February.

"We are observing evidence of growth in the electronics sector. Singapore being a highly open and trade-dependent economy, we anticipate a widespread recovery especially in both the electronics and non-electronics sectors," they write.

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